Sunday, March 10, 2013

It's the economy, stupid.

Very few analysts expect Raila Odinga's challenge of the electoral results of the presidential election to succeed. All are focused on whether Uhuru Kenyatta and William Ruto, president-elect and deputy president-elect, are able to unite the nation in the aftermath of a heavily contested general election. Especially because of the tribal tyranny of numbers, Messrs Kenyatta and Ruto may find it difficult to unite Kenyans as they embark on what is surely one of the most fraught presidencies in Kenya's history. While they fight to clear their names in the wake of their indictments at the International Criminal Court, they will have to contend with a political environment that may remain perilous for months, perhaps years, to come. Their administration will stand or fall depending on how they not only manage the onerous task of fighting their indictments at the ICC but also how accommodating and inclusive their policies, both political and otherwise, are.

How they unite the nation has been the subject of multiple commentaries in the Sunday papers. I propose that they use their economic policies as the lever to unite the fractious peoples of Kenya. Today, Kenya is in an unenviable position. Despite the fact that there are multiple institutes of higher learning, white-collar employment has not kept pace with the numbers of youth graduating from these institutes. Mwai Kibaki's administration, admittedly starting from a low point, struggled to create the environment conducive enough to the creation of such jobs. Uhuru Kenyatta, while he was Finance minister, could only come up with short-term blue-collar jobs in his stimulus package. This is nothing to sniff at; at a time when the population of unemployed youth, both skilled and unskilled, was rising inexorably, his Kazi Kwa Vijana programme and other youth-oriented programmes, ensured that for some portion of the year, Kenya's youth would have a source of income.

The challenge the two face today is surely how to ensure that the gains bequeathed by Mwai Kibaki's departing administration are safeguarded and used as a platform for greater job creation. Even without a commodities-driven economy, Kenya is still the most open economic environment in the greater Eastern Africa; the numbers out of Ethiopia and the Sudan mask a state-oriented economic policy that is surely to come unstuck when the political establishments in those countries suffer setbacks in their holds over their peoples in the face of a liberalising global economy. The same is true, to a large extent, of the economies of Uganda, South Sudan and Rwanda.

Messrs Kenyatta and Ruto must a pursue a policy that will empower employers, especially in the manufacturing sector, to expand production and, thereby, expand employment, both skilled blue-collar and white-collar. The emphasis, though, must be to encourage greater local consumption of manufactured goods, and greater export of value-added commodities and other goods. Kenya should not remain hostage to a raw-commodities-driven export economy coupled with greater import of manufactured goods. This will entail a mix of public stimuluses of the manufacturing sector, including tax incentives, as well as a gradual draw-down of the scale of public intervention in the sector. The overall goal should be to shrink the size of the State, whether at national or county level, and the expansion of the private sector. It is the private sector that must be the driver of economic growth, not the public sector.

To achieve this, their economic policies must include a complete overhaul of the regulation of labour and better enforcement of the law. Their administration must not pick winners in the market-place; instead, it must ensure that the playing field is level and that all employers play by the same rules. To achieve this, the two must resist the urge to manipulate the Judiciary or the market-place by relying on poorly thought out tax policies. Robinson Njeru Githae, Mr Kenyatta's successor at the Treasury, made many mistakes in his tax policies. He frequently capitulated to vested interests out to make a fast shilling at the expense of the overall economy. One of his proposals to tax bankers is being challenged in the High Court; analysts expect the Government to lose this fight.

If Messrs Kenyatta and Ruto wish to unite the peoples of Kenya, then their policies must ensure that more and more Kenyans enter gainful employment than not. Their economic policies must ensure that more and more employers hire more and more youth than has been the case of late. They must also pursue policies that will turn Kenya into a values-laden export economy, though that comes with is own set of risks. It is the economy that is their best chance of fashioning a lasting legacy, much as Mwai Kibaki's infrastructure development-driven economy will be his.

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